1. 1 Institutional Foundations of Economic Reform and Integration Bernard Wonder Head of Office Productivity Commission Tokyo 26 February 2007

2. 2 Task n Working regionally to develop national capacities

3. 3 What can we usefully do? n From the perspective of Australia’s Productivity Commission – the Australian Government’s principal review and advisory body on microeconomic policy and regulation; and – the institution most identified in Australia with microeconomic reform

4. 4 Regional co-operation n Share experiences n Share institutional solutions n Share priorities for reform agenda n Focus on particular priorities

5. 5 1.Share experiences n Number 1 (beginning of 20 th century) in world per capita incomes n To Number 4 (of 23 OECD countries) in 1950 n To Number 9 in the early 70s and 16 by late 80s

6. 6 Australia’s relative productivity performance Average annual labour productivity growth

7. 7 Why was this so? n High cost manufacturing sector n Low levels of innovation and skill development n Outmoded technologies n Inflexible work practices n High cost government provided infrastructure services

8. 8 Reform strategies that worked for Australia n Opening the borders n Unilateral liberalisation n Gradual change n Reform on a broad front n Specific adjustment measures

9. 9 Fall and rise of Australia’s economic ranking Rank based on GDP per capita, in 2005 EKS$, 23 OECD countries

10. 10 2.Share institutional solutions to: – Obstacles to structural reform; and – Promoting and sustaining reform

11. 11 Obstacles to structural reform n Costs are concentrated. Benefits are diffuse n Potential winners poorly informed n Bureaucratic structures aligned with sectional interests n Costs of reform front-loaded, benefits long term n Multiple jurisdictions

12. 12 Promoting and sustaining reform n Neutralising vested interests n Building community-wide support

13. 13 Productivity Commission Model Well informed policy decision-making and public understanding on matters relating to productivity and living standards, based on independent and transparent analysis from a community-wide perspective. Government Commissioned projects Competitive Neutrality Complaints Office Performance Reporting Regulation Review Supporting Research

14. 14 What is it about the Productivity Commission model that makes it work (in Australia)? n Independent, transparent and economy-wide analysis n Well researched advice that is impartial n Extensive public input n Draft and final reports n Opportunity for governments to respond to Commission reports n Wider awareness of the costs of existing policies and the benefits from reform

15. 15 3.Share priorities for reform Agenda

16. 16 The future agenda n Strengthening the national electricity market n Enforcing ‘water allocation and trading regimes n Delivering a more efficient freight transport system n Addressing costly regulation n Addressing greenhouse gas abatement n Improving consumer protection policies n Reviewing the entire health system n Examining vocational education and training

17. 17 4.Focus on particular priorities n What might be a good example? – regulation

18. 18 Growth in Australian Government regulation 0 10 000 20 000 30 000 40 000 50 000 60 000 1900s1910s1920s1930s1940s1950s1960s1970s1980s1990s2000s Total Pages Passed Estimated growth in pages of Australian Government primary legislation

19. 19 The paper burden (a small business perspective)

20. 20 Rethinking Regulation

21. 21 Common regulatory problems n Unclear or questionable objectives n Failure to target the regulation at the ‘problem’ n Undue prescription and complexity n Overlap, duplication and inconsistency n Excessive reporting and paper work n Unwarranted differentiation from international standards

22. 22 Recent decisions: New regulatory framework n Australian Government responded to the Report of Regulation Task Force and announced the 'New Regulatory Framework’ on 15 August 2006

23. 23 What might be the product of regional focus? n Principles of good regulatory process? n Better understanding of good regulatory analysis n Compliance Cost checklist n Competition assessment checklist n Sharing of national approaches to regulatory assessment

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25. 25 Institutional Foundations of Economic Reform and Integration Bernard Wonder Head of Office Productivity Commission Tokyo 26 February 2007